NBR headline article today (behind paywall) - "Tegel Too Chicken To Tell The Truth".
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NBR headline article today (behind paywall) - "Tegel Too Chicken To Tell The Truth".
Knowing Tim Hunter (one of the very few reputable tenacious financial investigative journalists left in NZ), he would have followed through with some hard questions to Tegel and received bugger all clarifications - hence the headlines.
Pretty damning for a company which has already failed to meet prospectus forecast not to be willing or able to answer questions from a journalist.
BTW - just saw drumsticks on sale at Mad Butcher for $2.99 kg (today only).
What I got from the article was that the major shareholder probably had a disagreement with the chairman (inference is that the chairman would not budge on position of coy and shareholders would not be happy with that because they may want to exit) All conjecture though but my partner knows James in a personal capacity and she said he does not take crap lying down. So probably what Hunter was inferring that there was a disagreement between chairman and 45% shareholder where it became untenable for chairman to continue. What does that mean for up and coming result one wonders?
Why wouldn't Affinity be happy?
They managed to hoodwink the market into paying what has turned out to be a very high price for 55% of the company?
IPO valuation of $551m for a company which is going to report a profit of $34m - PER of 16.2X?
The bloody cheek is the IPO price range of $1.55 to $2.50!
The $2.50 would have given TGH a valuation of $889m at $2.50 - PER of 21.7 times to 28.6 times on their downgraded forecast!
Turns out those who warned against the Private Equity sell down were right all along.
Totally disagree with your view on Tim Hunter. He wrote a scathing article on RBC and Luke Moriarty at the time of the verdict of the staff suing Arborgen case.
The unfounded case was basically thrown out on appeal.
Nothing from Tim Hunter when that was announced because it directly contradicted his view.
I suggest he may be going off half c o c k e d here also.
I certainly wouldn't put any value on his sensationalist articles.
All of the above is opinion only.
Well personally I think if they weren't going to hit forcast there would of been an annoucement by now. The financial year ended 30 April so they would have a fair idea by now. I still don't understand how there range was so wide but it's almost definite they are going to come in at the bottom end of guidance. Where to next year though? Who knows, but at around $1 you do start to see some value so long as there aren't more things Tegel is hiding.
I think the IPO was a bit of a sham but at the same time I still think Tegel is a fairly quality business that can turn it around in the next few years. It would probably be better if Affinity sold out in some ways so they can rebuild from scratch and have fresh leadership. I disagree that Affinity would of expected this SP performance in the IPO listing. At the end of the day they still hold 45% and do have to consider brand damage by a failed IPO.
I have followed Tim's articles over the years - all the way from Sunday Star Times to NBR - he has certainly saved me a few bobs over the years either from investing in or getting out of companies with questionable management.
Prefer myself to have a journo tackle management and companies on the hard issues rather than the mind numbing regurgitation of PR press releases masquerading as 'news' and investigative news. Tim is bound to get a few wrong there and then - goes with the territory.
Compare and contrast with Ingham - ING has announced they expect to meet prospectus forecast so stock is on PER of 12 times.
Given TGH's track record, it deserves to trade at at least a 20% discount to ING.
TGH at $1.07 has a market cap of $380m. Market is telling you to expect a profit of less than $30m.
Dumbfounded forecasting is the reason TGH has been dragged through the mud by investors...
ING had conservative forecasts that were not likely to be missed, TGH was plumped up as a high growth option for investors... right now TGH is undervalued given where it should be if forecasts are met - one month till we find out.
Ogden most likely went due to disagreement over a strategic direction the PE guys want to take (most likely stuff them with debt, and up the divi's) ((thats the company not the chickens))
If thats the case, then the next chair will have room up the back of his suit jacket for a large manipulative hand and will most likely do as he is asked
JMO, but somewhere between the truth and fake news
Who needs an independent director who resigns at first sign of trouble. He should have stuck with it and did his job.
Some Directors are smart enough to see the sh1t before it hits the fan, and given the liability of Director's, the smart ones get the heck out well before the calamity. Not saying that is the case here, just something to consider. Could be any number of reasons.
Not so.
The only course of action an honourable man has, when he disagrees with the major shareholder [if this is the case], is to resign.
It sends a very clear message/warning to shareholders.
This, coming on top of them not meeting their own forecasts,rings big warning bells to me.
I like compnies that do as they say they will.
Yes I sold out on the first broken forecast,and will avoid them until they can prove they are worthy of reconsideration.I have a very long memory.
His obligation is to the company and not the shareholders. If he was put in an untenable position by the other directors (ie they could not agree to a course of action) then what was he supposed to have done? He cannot really "stick with it and do his job" because his job is not able to be done. Sort of caught between a rock and a hard place. Go public is not an option either as that does not help the company, you cannot force other directors to do as you want, so as Percy says, there is no other action but to resign, and this should be enough warning to shareholders without actually coming out and saying that things are not as they should be.
Not dumbfounded - deliberately bullish and very high, to try and extract the highest price possible from the IPO. There can be no other conclusion to be drawn from the severe profit downgrade 6 months after the IPO.
Note that most of the proceeds were used to repay the redeemable shares of the vendors?
And there in lies the big difference between Ingham and Tegel - one with 'conservative' forecasts to give the company a strong share market foundation and positive sentiment, the other with what has turned out to be wildly bullish 'high growth' forecasts to extract the highest price from the market.
One is listed on ASX and the other NZX - says a lot?
TGH was sold as a high growth stock... turned out to be a low/mid growth stock... is now being treated like a negative growth stock...
Underlying EBITDA did meet the forecasted $75M for 2016... how they got the rest of it so wrong raises a few suspicions for sure.
For a good laugh - from comments in NBR a few months ago :
"It is a foul thing to commit to these strutting bantam roosters and their crowing claims of endless growth, a great turnaround story and a steady stream of profits making retail investors rich.
What do they take us for, a pack of silly old chooks? Most of us know that private equity isn’t there to make retail investors rich, retail investors are there to make private equity rich! Of course they will argue that to make an omelette from time to time you will need to break a few eggs, but the smart money knows to never put all your investment eggs into the one basket, and certainly not a private equity basket at that, for that is the quickest way for the chickens to come home to roost and a fox to be put among the hen house of poor investment returns. Sooner or later egg will end up on the retail investor’s face.
And look at Tegal and Inghams, both companies have now being left to play chicken with each other rather than delivering tasty nuggets to their investors. I think it’s getting to the stage where private equity needs to be told to scramble."
This really sums it up Balance. We have had far too many private equity lead IPOs in recent years that turn out bad for retail investors. I simply donīt touch any of these IPOs from private equity and while I realise I may lose out on some good opprtunities, I have no intention of changing that rule of mine. I donīt trust any of them and their pre IPO forecasts and commentary. Tegel is yet another good example and reminder.
There's an exception to every rule TJ but by and large I think what Balance and Iceman have posted above hits the nail squarely on the head !
As I said in my earlier post TJ " I realise I may lose out on some good opportunitiesĻ. Nobody is saying they are all bad investments. SUM is currently one of my biggest holdings. But I simply donīt buy into private equity IPOs these days and happy to wait for the companies to get some runs on the board before I invest in them. In Tegelsīcase, it has proven to be a wise move. Each to their own.
Agree with you on Tegel being one of those "iffy" buys at IPO... 1 year on and shedding almost 40% ... it has landed on a value pick for a lot of people looking for a high yielding stock at 6-8% that leads the market in an infinitely growing revenue model that has a somewhat low risk of disruption.
If the forecast is met, even on the lowest end, I would buy more shares in Tegel all the way up to 140c and look to hold for a lifetime...
Its never been about what opportunities you miss in the market, cause there's always many opportunities presenting themselves, its about the ones you are certain of that help you come out on top overall.
Now Tegal could be offering a good opportunity but it could also be a pitfall.
The Uncertainties
-Due to this coming out from private equity and the lack of history it means uncertainty.
-The poultry market is a bit mixed right now too so thats uncertainty there too.
-Chairman resigned so thats uncertainty of what happen inside the company.
Certainties (Lets not forget theses)
-Tegal supplies majority of NZ market (50%)
-Well-known brand
-Strong export product (NZ branded, no hormones added)
At the end of the day I think Tegal is still relatively a decent company, but it'd have to be selling at the right price to justify the uncertain risk presented. Where does the margin of safety present itself? Currently it'd be at the lowest guidance range of $33 million profit. Given Air NZ (whos generating cash hand over fist) was pushed to the brink of its pricing range due to competition and uncertain expenses and ticket pricing leading to profit drops, which was PE 8.4 (currently) I'm incline to do the same until they prove more. 33 x 8.4 = $277 million Market Cap or 78 cents would present the best buying opportunity (of course it may never get here and you can buy at higher range but the more the price trends here the better the justification for risk and I know you're going to say its different industry but for me risk is similar in terms of uncertainties). Lets say they achieve mid range target, of $36.5 million profit then I'd still prefer 86 cents before I could feel safe buying.
*These prices adjust for a mixed negative with positive situation
AIR is a poven listed company, TGH is a unproven listed company, both are in an uncertain industry and in competitive markets. Ones growing and the other declining in revenues, so for me they intersect in value. Growing revenues with low margins? I can find you many examples like WHS for example, it doesn't mean much if you're not making extra money for the risk taken, all it does is expand a cost base that may comeback and bite you if not properly compensated.
Book value (Assets $716 - Liabilities $244 - intangibles $334 = $138 million your liquidity value or book value if anything bad was to happen, as a shareholder you would get about 38 cents back
Not too far off from you :
ING has stated it will come in at forecast - so trading on PER of 12X.
Allowing for the two months lag between balance date, TGH should trade at best on a discount of 10% to 20% against ING.
Assuming that TGH (by hook or by crook or cook) come in at $31m, it should trade at 84c to represent reasonable entry.
Remember that downgrades do not come in ones - they come in threes.
I agree 100%. Private Equity has a MASSIVE vested interest when they make their forecasts. Generally the company being floated has already been the subject of serious restructuring and financial engineering and often forecasts are predicated on the results from these panning out as expected, which often of course they don't. Wealthy private equity investors can't help themselves being greedy nine times out of ten, in my opinion, so a cautious investor does well to take a prudent approach and let the company get some runs on the board and prove itself.
Equivalency has now been drawn between food [ which is required for human life] and a thousand dollar aeroplane ticket to get you halfway across the world because you need a break from work...
It is not like Tegel is selling a luxurious niche product that given a downturn in the market will see a drastic shift in consumer behaviours, they sell chicken for Godsake!
I can tell I am not getting my point across here, if I think its a good buy at $1.07, I sure as hell am going to buy in at 80C for a 10% dividend in a company that sells food to hungry people...
This time I might have to disagree Roger. If they hit thirty million dollars about a $1 seems fair. Remember people were happy to buy in at $1.55 on a forecast of 45 million profit. They are going to fall short but not by 50%.
There are still lots of attractive things about the sector in general. I think it's looking ok around the current price, but there are certainly concerns which could push it lower.
No equivalency has been drawn between food needed for living and flight tickets needed for travel whether for business, special occasions and general travel (not just tickets for worldwide travel, last I checked AIR was a domestic carrier too ^^.) Flying has become a general transport need like a car. Flying is no longer just a luxury, though it can be too, but very much affordable and many people can travel for quite low prices these days, heck price of a few chickens can have you on the plane these days when buying right.
Actually Tegel do sell premium added value products, a luxury in terms of chicken products, not everyone will be having a budget to afford that. Most only having a budget for their chicken drums, thighs and the whole chicken (low margin products).
Your points are taken and its a fair perspective, though I feel you've narrowed your vision down too much, perhaps it may serve you well and perhaps it won't, markets generally shows whose right in the long run and if you think the risk is worth it at $1.07 I can respect that too. I hope you can keep that optimism if in the case it drops to 80 cents and keep enough money to average down.
Following simple TA analysis would have avoided holders losing a LOT of money. Clear and ongoing downtrend since last August at $1.80. Breech of the 100 day MA would have seen IPO investors sell at $1.67 for a modest profit. NEVER EVER buy in a downtrend (KW). Currently the 100 day MA is $1.25.
Until that's breeched on the upside confirming the end of the downtrend and the establishment of a recovery, TA people would be keeping their powder dry.
For more aggressive TA investors looking to buy into the early stages of a trend reversal even the 30 day MA is at $1.14.
With the recent resignation of the Chairman I see no reason to take a speculative position regardless of what PE one think's is fair because the question is just as much what is the profit for FY17 but also what is the outlook for FY18 ?
So very true.................PPH...??????????????......... .....lol.
If a FMCG Demand Manager has a lot of product to shift - particularly if it's perishable fresh product, they will tender/pitch for the promo space with the supermarket category manager.
That will mean either paying for the shelf space (e.g. those aisle end product specials aren't randomly chosen, the manufacturer has to buy that space) and/or doing a deal for the product to be sold cheap to the the supermarket (sometimes it might be a low price, for other reasons - it might be some 'free product' or a rebate if the volume is achieved (which of course it will be as the category manager won't be lured into setting a high hurdle to get their rebate/credit or their free pallets of product). Inghams and Tegel are apparently busting at the seams with fresh product - so you'll see fresh product used as a loss leader. Excess fresh product is usually frozen or turned into value add... when that value add starts being discounted then it's a good indicator that the frozen warehouse space is full as well.
https://www.nzx.com/files/attachments/258911.pdf
A month away and all will be revealed - will the chooks be clucking or chucking?
A fan dance coming on with very few feathers.
From Investor relations 28/05/17, bog standard reply in regards to Ogden... still nice to see my "no news is bad news" bait being taken.
Financials for the year ending April 30 would surely be well known... conviction is still there for me.
Hi XXXX
Thank you for your e-mail.
Having valued his tenure at Tegel, James Ogden has sought to balance the number of board roles and other responsibilities which he wishes to concentrate on. James worked very hard as Chairman of Tegel and was very much focused on the IPO process from the very early stages in September 2015 and seeing the company through listing on the NZX and ASX. We are very grateful to James and the work he put in.
Tegel has a leading market position and is number one across all branded poultry product categories in New Zealand. We have an established and growing export business and have well recognised products across a range of categories.
We look forward to presenting our annual results to market on 27 June.
Kind regards
XXXX
PS I understood the proverb to be “No news is good news”.
Did they email you this? Why didn't they say this in their announcement then or in response to nbr??
So no news is good news = NPAT of $34m
No surprises
Current share price what market thinks it worth - ie fairly valued?
What (if anything) is going to drive shareprice forward to say $1.50?
I'll play devil's advocate for you winner....
Chicken prices are near 10-year lows. FY18 might see a gradual recovery in prices as inventory issues resolve slowly as both major players, post listing, start to behave a little more rationally in their NZ duopoly (Tegel & Ingham are c. 85% of the NZ poultry market). Tegel could easily make $40m npat if that scenario plays out and with better sentiment (i.e. all the disappointed ipo punters have sold out for $1.05-1.20 a share) the share price might recover towards $1.50 as the expectation of higher npat and dividends takes hold. Essentially the float was priced too aggressively and they look to be at least a year behind their IPO forecasts but if they start to look like they can deliver 10% npat growth then the sentiment/share price could recover quite quickly...
I am guessing they didnt have a gathered response to the departure for the market announcement and talking to the press would make it seem like a big deal...
Attachment 8867
LOL at them saying no news is good news. I love how much Tegel talk themselves up despite losing shareholders 35% in capital in one year. I still think it's fairly priced at the moment but I'm not buying anymore than a few thousand shares until they give me a bit more confidence
Nice of them to give a reply but not nice at all of them to try and hoodwink Joe Public with the BS on James Ogden resigning.
What an absolute load of garbage to come out with that line about James wishing to concentrate on other board roles! If that was the case, that would have been stated when he resigned AND James would have provided notice for an orderly exit.
If James resigned for the stated reason with the way he left immediately, I would have to say that he has well and truly lost credibility in a big way.
Begs the question what kind of fools Tegel must think the investing public are - maybe not surprising given they managed to hoodwink with an IPO process with financial forecasts which bear no resemblance to reality!
"James Ogden has sought to balance the number of board roles and other responsibilities which he wishes to concentrate on. "
Even if we accept that as the reason, so he chose to keep the best roles and ditched the questionable ones i.e Tegals?
Some companies Ogden director of not been good investment - Tegel, Warehouse and to some extent Summerset
NBR today : "Ex Tegel chairman cites ‘angst’ on missing profit target. After his sudden resignation last month, another company’s shareholders get an explanation."
Interesting.
Now why would Mr Ogden resigned suddenly and without notice in May 2017 over the missed profit target which was announced in December 2016?
Unless it is a case of him reviewing the results for 31 March 2017 in May and he decided he had enough of yet another downgrade?
Why does everybody think that a resignation of a chairman of an underperforming company is some sort of doomsday event, what are the chances of Ogden being "asked" to bow out?
Strong word 'hate' JeremyALD!
Making them accountable - that's more appropriate language for a company which :
1. Inflated forecasts to suck investors into its IPO - no other way to explain a reduced forecast (with a reduced range big enough to drive a truck through),
2. Has its Chairman resigned suddenly without any explanation,
3. Wrote to one shareholder/investor/poster with some cock and bull story about the Chairman resigning to 'balance' :D his board positions and other responsibilities. http://www.sharetrader.co.nz/showthr...gel-IPO/page58
Explanation required - 1. is bad enough but to compound 1. with 2. and 3. verges on total contempt for investors and shareholders (save those who are happy to accept 1., 2. & 3. as feather plucking good stuff).
Did you get burnt personally? I agree it's been a shambles but I do think the dislike on this thread has become a bit overbearing, at least until they release their next results. Tegel is still a sound company regardless of the bs in the IPO. The market seems to have found fair value around these levels. Strong support at 1.05
Just after the IPO two leading brokers had target prices of between $1.95 and $2,10.
Now support at $1.05.?
Why?
To find the answer,read Balance's post.
I prefer to invest in companies who do what they say they will do.
TGH can't even meet their on forecasts.
I now see them as a proven underperformer,whom lack credibility ,and trust ,from investors ,such as myself.
I agree Jeremy the sentiment seems irrationally negative. I've no doubt they were too aggressive in their IPO forecasts but thats why I avoided them at $1.55+ (don't get me started on the appalling float process re the price either). However, chicken prices are at 10-year lows which is a material change from when they floated and the company will still make $30m+ npat - if they don't deliver that then they'd be more than 10% below their recent and reconfirmed guidance and everyone would have cause to complain loudly. So at $30m+ we have a company at 12x earnings selling a product at a cyclical low in pricing (opinion obviously on actual cyclical low) and quite low balance sheet gearing.
I am now long at $1.13 and think we can see 40-50% upside over 2-3 years plus a fully imputed 6%+ yield - I like the odds at this point despite all the negativity. I'll be looking at the result closely and may change my view but thats investing...
1. Chairman of company resigned abruptly with no explanation in May 2017.
2. Company wrote in response to one poster that he resigned to 'balance' his board positions and other responsibilities.
3. Chairman told another company's shareholders he resigned due to 'angst' over profit forecasts - 5 months after profit downgrade (Dec 16) and 2 months (May 17) after balance date (when results are presumably known and being finalized).
2. and 3. do not compute.
Ironically, this is what Mr Ogden had to say about the appointment of a full time PR executive at Tegel :
Chairman, James Ogden says Ms White's extensive investor relations experiencewill greatly assist the organisation with its focused growth strategy.
"We are looking to grow our business domestically and in offshore markets,"says Mr Ogden. "Aleida's local and international experience will greatly
support these goals and
strengthen the provision of information and relations with our investor community."
*************
First real opportunity to engage with the investor community re sudden resignation of Chairman and she FAILED BIG TIME. Sp fall is testimony to that gross mismanagement.
She and Tegel must think that the whole of the investor community are like the chooks Tegel slaughter by the millions each month. Or is it a case she thinks everyone is a headless chook?
I have a few of these. OK the IPO was a flagrant money making exercise for the promoter. Overpriced at the IPO price, but still this company does produce something, and does it fairly well. At 1.05 I feel it is worthwhile sticking with in the long term. Just wish they would become more principled in their outlook. The Directors should forget about the shareprice for now and concentrate on building a worthwhile company, and get rid of more debt and write off more goodwill. Incidentally chicken prices may be a t a low but not for long. My wife and I had Carls Jnr last night, it cost us $29-90 for two and we didnt order anything extreme. WQe talked about it and it is cheaper and probably better for you to go to the supermarket, get a rotisserie chicken, saland and some rolls. So that is what we are going to do now. I bet a lot of people are thinking the same thing.
Tegel shareprice going well today - up to 110
Looks like NZX have passed the baton to S&P to manage our various indices. Well talk about dumbing down inefficiency; i can't find any relevant info when i click on what I'm told to ;there is nothing there about the NZ mkt let alone the companies that make up the various index's!! maybe someone else more techie can but not user friendly in my book!.
try this link
it lists all S&P announcements, filtered for "NZ". Right now the current changes are the top announcment. I watched on Friday for the
announcement to appear and it appeared on the list AFTER market close! Does anybody know if fund managers or other subscribers have prior access to these announcements???
Thanks ; let me know if you can find what stocks make up the various indices e.g. NZX 50. Im done looking.
Fund managers and brokers (the proactive and progressive ones anyway) track the stocks in the indices very closely - most of the time they have a good idea of what are likely to be included and excluded in the forthcoming reviews. All based around market cap, excluded shareholdings, time on the market etc.
But gone are the days when funds make changes only on the day of the index changes - nowadays they try to take positions well ahead of time.
The fund managers and brokers subscribe as well of course to the index services - costs money. Am sure NZX gets a cut from S&P.
NZX does not wish to publish this info, however they try to sell a product called 'Smartshares', one of which (FNZ) is basically the NZ50 with each
share capped at a maximum of 5% weighting. Funds like this must regularly publish reports about their underlying investments - you will find your
list of NZ50 shares in their last report (dated 31-03-2017). Since the amount invested in each is listed, you can also calculate the weightings.
On 31-03-2017 FNZ held 591000 TGH shares.
correction: the fund is FNZ (=fifty NZ), not TNZ ! sorry
try this link for the FNZ annual report.
Page 12 & 13 have the details.
Just bought a small parcel, have to declare soon! :D
Surprising strength given they are about to get the boot from NZX50. Chicken CPI up?
and the higher socio-economic groups buy the shares
Was doing something else but found these numbers
Poultry production in NZ over the years - up to March this year (from Stats NZ)
At record levels ....but annual growth has been slowing the last few quarters
No idea what it means but interesting
Surprised not to see anyone mention that special crossing of over 10mln shares @1.075 around midday.
Did no-one see that big Tongariro size crossing go through around midday?.Guess everyone was chow downng their smorgasbords?
Woooooooosh
I think it's safe to say there won't be another downgrade which is leading to a bit of a SP recovery heading towards the annoucement.
Likely no downgrade, though investors are looking optimistic about this meeting the middle of the guidance, quite a gamble if you ask me since I view it near the lower end.
Lets hope no one-off items are added in there either.